- Look for companies where management owns a large percentage of the stock. A vested interest at a higher share price is even better.
- Look for a tight capital structure. A bloated outstanding share count is a red flag. As is a history of management carelessly diluting away shareholder interest by issuing new stock.
- Look for a thrifty management team. A good company should spend their capital on projects, not swanky new offices.
- The company's mine should remain profitable even if gold drops to $1,000 per ounce. It could happen.
- Look for companies with enough cash to finance their current drill program, expansion plans, feasibility study, or construction phase. This year in particular, companies are having a very difficult time finding financing. Those who have adequate cash are diamonds in the rough.
- Know which countries support mining. A tier-one asset under the control of a wildly corrupt government isn't really a tier-one asset. You don't want to get caught in the middle of a government dangling final permits above managements' heads.
- Know the geological potential of the exploration area. A four-million-ounce gold deposit is swell, but what if your company discovers not just one gold mine, but an entire new gold district? How will you factor in that upside?
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Doug Casey is a world-renowned investor and author, whose book Crisis Investing was #1 on the New York Times bestseller list for 29 consecutive weeks, a record at the time.
He has been a featured guest on hundreds of radio and TV shows, including David Letterman, Merv Griffin, Charlie Rose, Phil Donahue, Regis Philbin, NBC News, and CNN; and has been the topic of numerous features in periodicals such as Time, Forbes, People and the Washington Post.
His firm, Casey Research, LLC., publishes a variety of newsletters and web sites with a combined weekly audience in excess of 200,000, largely high net worth investors with an interest in resource development and international real estate.
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